American Red Cross- Basic History/Overview

The American Red Cross is a non-profit organization supported solely off of financial donations and volunteers (community). Red Cross mission is to “provide relief to victims to victims of disasters and help people prevent, prepare for, and respond to emergencies. Red Cross was founded in 1881 by Clara Barton. Who was inspired by the Red Cross during the Prussian War. She first implemented what she had experience over in Europe in the U. S. during the Spanish American War in the 1898.

The Red Cross joins more than 175 other national societies in providing aid to those in need across the world. The American Red Cross follows seven bylaws: humanity, impartiality, neutrality, independence, voluntary service, unity and universalities. Today the Red Cross have over a half million volunteers and 35,000 employees. The President of United States is the honorary chairman of the Red Cross and appoints the eight governs. In recent history American Red Cross had had its share of troubles which stated at the top of the executive tree and has seen several top resignations in the last decade.

Ethical Issues/Key Facts: Red Cross main issues were around mismanagement of funds and donations to the Red Cross. In 2001 the American Red Cross ousted Elizabeth Dole, due to the fact of slow responses to 9-11 attacks. This started the Era of host of top executive failures and the doors kept revolving every few years with new presidents. Resignations varied anywhere from slow responses to mismanagement, lack of communication to misconduct with financial funds. After 9-11 the Red Cross had established a fund for those impacted by the incident.

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Red Cross received over $500 million dollars in pledges but only contributed a 1/3 of those funds to the 9-11 relief efforts. This sparked an ethical issue with ARC as far as monetary donation mismanagement.  Hurricane Katrina sparked another issue for ARC. Again had ARC received over $2 billion dollars in donations and the public scrutinize as what was done with that money. These responses were the outcome of fraudulent and inefficient decisions. Red Cross downfalls continuously tend to be around monetary donations and the management of those funds.

I think the biggest problem are those at the top and how they are giving severance upon getting fired or resigning due to fraudulent activities of mismanagement of funds. This sends out a message to employees that it’s ok if you at the top of the chain and take money from us (ARC) we will still compensate you at the end. ARC needs to regain it trust in the community and communicate with the public as to how funds are distributed and the manner they are distributed in.

Some of the problems that ARC encountered with handling donations was that the monies that were donated where not allocated according to that particular disaster. Initially triggering this was 9-11, the public was outraged. The ARC would create funds, for example the Liberty fund for 9-11, however only gave one-third of it to relief efforts. People gave these donations with intentions that ARC would use the monies for the victims and their families. Another issues was the slow response time with Hurricane Katrina and it’s relief fund.

The ARC has many issues as listed in the case from executive compensation, employee misconduct, considering all stakeholders and slow response time. But I think the overall reasoning is once again at the top with poor decision making, improper leadership skills and inadequate use of donations. And I think in order for ARC to avoid these issues they need to “clean house” and train corporate managers and volunteers, not to mention develop a process for better communication through out organization in time of disaster needs.  I think that organizational structure has a great effect on ARC ethical issues, because it goes hand and hand with compensation and communication. I think the ARC can be revamped organizationally from the top to the bottom and this would eliminate the biggest ethical issue ARC has, which is mismanagement of donations. I also think that ARC has more Chiefs then Indians. Meaning that ARC has to many people at the top, with little leadership skills and poor business tactics.

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